Returning PCP car early - Flag placed on credit file

zippy1973

Just looking for a little advice regarding handing back my current car on PCP early to take delivery of a new one.

I don't have any debt (No mortgage or loans and I pay off any credit spends (IN FULL!!) every month, but rarely use a credit card. I seem to have a decent credit score (622/710 on credit karma and 490/700 on clear score, whatever that means!)

I have my current car contracted to end of September and went back to the dealership to look at my next one however on looking around,  I can get the same car over £5k cheaper over 3 years. No brainer, but now I am not going with the dealership, I have to deal with the finance company directly. I can hand my current car back early by paying anything outstanding (about £350 outstanding), that's not an issue, what is, is in the small print it says if a contract is terminated early then the finance company will place a 'flag' on my credit file to note this, and which apparently all lenders can see. I'm not looking to apply for any finance anytime soon if at all, but my question is, should I be worried about this 'flag' on my credit file?

Opinions would be gratefully received as I would plan to start the ball rolling to return this car over the next few days as my new one will be ready for delivery around 25th July.

[Deleted User]

zippy1973 said:

I don't have any debt (No mortgage or loans and I pay off any credit spends (IN FULL!!) every month, but rarely use a credit card. I seem to have a decent credit score (622/710 on credit karma and 490/700 on clear score, whatever that means!)

Fortunately, nothing at all. The scores are just for entertainment - you'll be assessed on your credit management.  Using your credit card regularly is an easy way for you to demonstrate good management and improve how lenders view you.

The lender will mark the debt as settled on your credit file - in other words, it's a flag that shows lenders that you can repay debts successfully. So a good thing.

zippy1973

Below is copied and pasted from the terms.

(Finance company) complies with the Data Protection requirements which asks lenders to give a true and accurate record of a customer’s account. We’d therefore like you to be aware that a Voluntary Termination flag will show on your credit file once you have confirmed with us your wish to instigate a voluntary termination. Your credit file will be seen by other lenders who may take into account the Voluntary Termination flag when assessing your application for credit. Copies of your credit file can be obtained by contacting Experian, Equifax or Callcredit whose details are readily available through the Internet

[Deleted User]

zippy1973 said:

Just looking for a little advice regarding handing back my current car on PCP early to take delivery of a new one.

I don't have any debt (No mortgage or loans and I pay off any credit spends (IN FULL!!) every month, but rarely use a credit card. I seem to have a decent credit score (622/710 on credit karma and 490/700 on clear score, whatever that means!)

I have my current car contracted to end of September and went back to the dealership to look at my next one however on looking around,  I can get the same car over £5k cheaper over 3 years. No brainer, but now I am not going with the dealership, I have to deal with the finance company directly. I can hand my current car back early by paying anything outstanding (about £350 outstanding), that's not an issue, what is, is in the small print it says if a contract is terminated early then the finance company will place a 'flag' on my credit file to note this, and which apparently all lenders can see. I'm not looking to apply for any finance anytime soon if at all, but my question is, should I be worried about this 'flag' on my credit file?

Opinions would be gratefully received as I would plan to start the ball rolling to return this car over the next few days as my new one will be ready for delivery around 25th July.

No brainer would be to pay off the PCP and keep the car, rather than continuing a cycle of debt and never "owning" a car but rather renting for a huge amount

zippy1973

Deleted_User said:

zippy1973 said:

Just looking for a little advice regarding handing back my current car on PCP early to take delivery of a new one.

I don't have any debt (No mortgage or loans and I pay off any credit spends (IN FULL!!) every month, but rarely use a credit card. I seem to have a decent credit score (622/710 on credit karma and 490/700 on clear score, whatever that means!)

I have my current car contracted to end of September and went back to the dealership to look at my next one however on looking around,  I can get the same car over £5k cheaper over 3 years. No brainer, but now I am not going with the dealership, I have to deal with the finance company directly. I can hand my current car back early by paying anything outstanding (about £350 outstanding), that's not an issue, what is, is in the small print it says if a contract is terminated early then the finance company will place a 'flag' on my credit file to note this, and which apparently all lenders can see. I'm not looking to apply for any finance anytime soon if at all, but my question is, should I be worried about this 'flag' on my credit file?

Opinions would be gratefully received as I would plan to start the ball rolling to return this car over the next few days as my new one will be ready for delivery around 25th July.

No brainer would be to pay off the PCP and keep the car, rather than continuing a cycle of debt and never "owning" a car but rather renting for a huge amount

Appreciate the reply. I suppose I am one of those who likes to change cars and get a new one every 3 years. I'm not interested in 'owning' a car, depreciating the minute driving off the forecourt,  having to see what my car is worth every 3 years when changing, it's more convenient handing back and getting new. My priority was owning my home and working hard, paying off my mortgage in my early 40's

Grumpy_chap

zippy1973 said:

Just looking for a little advice regarding handing back my current car on PCP early to take delivery of a new one.

I don't have any debt (No mortgage or loans and I pay off any credit spends (IN FULL!!) every month, but rarely use a credit card. I seem to have a decent credit score (622/710 on credit karma and 490/700 on clear score, whatever that means!)

I have my current car contracted to end of September and went back to the dealership to look at my next one however on looking around,  I can get the same car over £5k cheaper over 3 years. No brainer, but now I am not going with the dealership, I have to deal with the finance company directly. I can hand my current car back early by paying anything outstanding (about £350 outstanding), that's not an issue, what is, is in the small print it says if a contract is terminated early then the finance company will place a 'flag' on my credit file to note this, and which apparently all lenders can see. I'm not looking to apply for any finance anytime soon if at all, but my question is, should I be worried about this 'flag' on my credit file?

Opinions would be gratefully received as I would plan to start the ball rolling to return this car over the next few days as my new one will be ready for delivery around 25th July.

Why are you handing the old car back early?  Can the new car not be arranged to start from September?

Are you aware that handing the car back is not the only option at the end of a PCP?  What is the equity in the car versus total credit outstanding?

zippy1973

I'm handing back early as the dealership price was high and on shopping about, I can get the exact same car £150 cheaper a month and the new car has come into the UK a bit earlier than expected. The dealership basically told me to bite their hand off.

There is no equity in the car according to the dealership, wiping its face was the salesman's exact words, not what I was told 3 years ago when I was told there would definitely be equity at the end! I am aware I have options

My previous was PCH, not an issue, paid monthly over 3 years, handed back, worked perfectly. Then on looking for the next in 2018 (current), went down the PCP route which I am wishing I hadn't, it's definitely cost me more.

Now going back to PCH who are supplying the same car over the same terms (months and mileage) at over £5k cheaper over the term. Its this 'flag' from the current finance that concerned me.

GrumpyDil

Personally don't like PCP but if you are saying you will make the final payments and then hand the car back, albeit early, then presumably no VT marker.

If you hand it back early without making the finsl payments then VT marker. 

Grumpy_chap

zippy1973 said:

There is no equity in the car according to the dealership

Don't just take the dealership's word for it.  Try WBAC or Motorway to test the validity of what you have been told.

MalMonroe

Grumpy_chap said:

zippy1973 said:

There is no equity in the car according to the dealership

Don't just take the dealership's word for it.  Try WBAC or Motorway to test the validity of what you have been told.

That's a good idea. My own PCP agreement ends mid-September and I've been doing a quick check with WBAC every so often. Currently they say my car is worth £2k more than the amount I have to repay at the end of the term. All dealerships are just looking after their own interests, so take no notice when they say there's no equity in the car.

People may say they don't like PCP but it has worked out well for me, I have had a fairly new car for two years at 0% interest with an affordable monthly cost. 

phillw

MalMonroe said:
People may say they don't like PCP but it has worked out well for me, I have had a fairly new car for two years at 0% interest with an affordable monthly cost. 

PCP is like anything on finance, you should compare the total cost of buying for cash compared to the total cost of borrowing the money (the interest might not be the only extra cost for PCP).

New cars aren't money saving, handily when you buy a car on PCP at 0% they tell you exactly how much money your car is losing in value every month.